Calculate your Loan EMI & Total Interest Due
4,292Monthly amount paid to your Loan provider
Your debt repayment schedule in regular instalments over a period of time.
| Year | Principal Paid(A) | Interest Paid(B) | Total Payment (A+B) | Outstanding Loan Balance | Pre-payment |
|---|
EMI stands for Equated Monthly Instalment which is a fixed amount of payment a borrower has to make to the lender at a specified date on monthly basis. EMIs consists of your principal loan amount and interest amount, payable every month.
Although the EMI remains fixed for every month, the amount paid towards principal and interest changes. The interest component constitutes a major portion of the EMI payment in the initial stages. However, as the loan period progresses and the principal outstanding reduces, the portion of interest repayment decreases. This happens until the end of the loan period when the entire loan amount has been paid off.
To put it quite simply, an EMI calculator is a tool that will require you to enter the amount you want to borrow, the duration of the loan, the interest rates and the processing fee and it will do the rest. The basic formula that works behind an EMI calculator is:
E = P x r x (1+r)^n/((1+r)^n – 1)
Here:
This is the most basic formula that will be used by the calculator but there are some that may even include things like the processing fee for the loan, into the calculation of the monthly instalment. The processing fee will generally be a certain percentage of the amount being borrowed and can range from 1% to 3% but since it is decided by the bank it can be different for each bank.
Whether you obtain a secured loan (home loan or car loan) or an unsecured loan (personal loan), you have to repay the loan through Equated Monthly Installments (EMIs) over a specified period of time called the loan tenure. The cost of your loan is calculated in terms of monthly payments. Loan EMI calculation can help you find out the monthly cost of your loan. Accordingly, you can create a monthly budget to balance your income and expense.
To ensure your loan EMI payments are within your repayment capacity, you can either adjust the loan tenure or the loan amount, or both. You can’t adjust the loan interest rate and processing fee levied by a bank. However, you can compare various loan offers and choose one with a low interest rate and zero processing fee to lower the cost of your loan. Here are some important reasons why it is advisable to calculate your loan EMI beforehand:
Manual loan EMI calculation can be cumbersome and prone to human error. With the advent of technology, it has become easier to calculate loan EMI online with just a few clicks of your mouse. Use the free online EMI calculator available on a reliable third-party website or a bank website to get instant and accurate results. Online EMI calculators can be used to calculate the cost of any type of loan scheme that you choose.
There are three parts to the information that the calculator provides. The first is the EMI itself, the second a breakup of the payments due and the third the amortisation table.
The EMI or the Equated Monthly Instalments are the amount that you can expect to pay if you go in for a loan. It includes payments of the principal and the interest that is applicable on the loan. It is the most important information that the calculator provides since the EMI is at the basis of the decision about the affordability of the loan.
The breakup is a breakup of the entire amount that you will pay to the bank or the financial institution. It will tell you the amount that will be paid back as the principal and the amount that will be paid as the processing fee for the loan. It will also tell you how much of the repayment will be the interest on the loan.
The amortisation table is a snapshot of the progression of the loan and tells you how much you will have paid back at the end of each year, as the loan progresses. It also helps you understand how the interest on the loan will be paid back. It also shows you how much of the initial EMIs will be the interest and how much will be the principal.
Most banks offer car loans up to 85% of the on-road price or ex-showroom price of the car. Tip to borrowers - make a higher down payment to lower the cost of your car loan. Let’s say the total price of your dream car is Rs.15 lakh and you have Rs.5 lakh to put as down payment, then a car loan of Rs.10 lakh can be used to pay the remainder of the cost.
To calculate the monthly cost of your car loan, use the free online EMI calculator. Enter the principal loan amount, loan tenure, interest rate and processing fee into the tool and click on the ‘calculate’ button. You will get instant and accurate results in the form an amortisation table, a pie-chart, and a colorful bar graph.
The amortisation table represents the periodic repayment schedule of your car loan. It consists of the monthly EMIs, interest payments, and the outstanding dues after each EMI payments.
Here is an example to better understand the amortisation table:
Car Loan Amount - Rs.10 lakh
Car Loan Tenure - 7 years
Car Loan Interest Rate - 12%
Processing Fee - 2%
Based in the EMI formula, E = P x r x (1+r)^n/((1+r)^n – 1), the overall breakup of the total amount payable is as follows:
Monthly Car Loan EMI - Rs.17,653
Total Interest Due - Rs.4,82,830
Processing Fee - Rs.20,000
Total Amount Payable - Rs.15,02,830
Your car loan repayment schedule in regular instalments over 7 years (2018 to 2024) is represented in the below-listed amortisation table:
| Year | Principal Paid | Interest Paid | Total Payment (Principal + Interest) | Outstanding Loan Balance |
|---|---|---|---|---|
| 2018 | Rs.97,057 | Rs.1,14,776 | Rs.2,11,833 | Rs.9,02,944 |
| 2019 | Rs.1,09,365 | Rs.1,02,467 | Rs.2,11,832 | Rs.7,93,579 |
| 2020 | Rs.1,23,235 | Rs.88,597 | Rs.2,11,832 | Rs.6,70,344 |
| 2021 | Rs.1,38,865 | Rs.72,969 | Rs.2,11,834 | Rs.5,31,480 |
| 2022 | Rs.1,56,476 | Rs.55,358 | Rs.2,11,834 | Rs.3,75,004 |
| 2023 | Rs.1,76,322 | Rs.35,514 | Rs.2,11,836 | Rs.1,98,683 |
| 2024 | Rs.1,98,685 | Rs.13,151 | Rs.2,11,836 | Rs.0 |
Using this calculator is very easy. All you need are the following loan details:
(If you don’t have this information at hand, you can obtain it navigating to your chosen bank’s loan page under the section ‘Select a product to begin’, featured under the calculator).Once, you have these details, use the sliders to set the required parameters for the loan amount and tenure. Then, input the interest rate and processing fee in the relevant boxes.....and Voila!
The loan EMI calculator will instantly reveal your monthly EMI amount payable on the loan!
It will also provide a clear, graphic and tabular break-up of your loan repayments, using the EMI so calculated. In addition an amortization table is created which gives you a detailed overview of your repayment schedule. A cut above the rest, BankBazaar’s EMI Calculator delivers more than you expect.
BankBazaar has customised its EMI Calculator to suit different loan schemes. To calculate your EMIs on your personal loan, navigate to the Personal Loan EMI Calculator provided under the sites ‘Financial Tools’ section. Similarly, you can calculate EMIs on your auto and home loans using BankBazaar’s Car Loan EMI Calculator and BankBazaar’s Home Loan EMI Calculator, respectively.
Should you find yourself flush with cash, you may decide to prepay your loan (i.e. pay an extra amount towards principal). If so, you can calculate your new EMIs by adjusting for the amount you wish to prepay. This will let you know how much interest you save by reducing the principal outstanding. (interest is calculated on the principal outstanding)
When you are planning to take a loan for your financial needs, you need to calculate the amount that you will have to pay through equated monthly installments (EMIs) in order to match with your repayment capability. For this, you will need to factor in the loan amount and rate of interest (ROI) along with the term of your loan. However, your equated monthly installments (EMIs) can be impacted for a number of reasons. Mentioned below are the scenarios when a loan EMI can change:
Pick the most affordable loan by comparing EMIs for different loan tenures. This can be done by altering the loan period in the calculator; keeping the loan amount and interest rate the same. By lengthening the loan period for a chosen loan scheme, the EMI amount can be reduced. Using the calculator, you can quickly compare EMIs for different tenures and choose the one that most suits your budget.
Understand loan repayment schedules by altering the interest rate, keeping loan amount and tenure the same. In case of fixed rate loans, interest rates remain constant over the loan tenure. In this case, EMIs also remain constant. This is usually the case with car loans and personal loans.However, in case of floating rate loans, interest rates can vary with movements in market rates. In this case, EMIs will change. This is particularly beneficial for home loans.Input the new interest rate in BankBazaar’s EMI Loan Calculator to compare EMIs before interest rate changes and after. A new amortization schedule is also generated to reflect changes in EMIs.
A fixed rate of interest is one where the interest rate on a loan remains fixed throughout the loan repayment period (loan tenure). This type of interest rate is comparatively higher than a floating rate of interest. Fixed rate of interest is better for those who don't prefer the risk of fluctuation that is an integral part of a variable interest rate. In the case of a fixed rate of interest, the loan EMI remains the same throughout the loan tenure.
The online loan EMI calculator can be used to calculate loan EMIs with a fixed rate of interest. Depending on the results, the borrower can carefully plan his or her monthly budget in order to maintain a low debt-to-income ratio. All one has to do is enter the loan amount, loan tenure, and fixed rate of interest rate into the tool and click on the ‘calculate’ button to get instant and accurate results. If there is a processing fee charged by the bank, enter the processing fee into the too. If you want to prepay your loan before the end of its loan tenure, you can enter the prepayment amount into the tool to get a revised amortization schedule. Banks charge a prepayment penalty for loans with a fixed rate of interest.
Floating rate of interest changes depending on the market-lending rate. It is also known as variable rate of interest. If the lending rate increases, the floating interest rate will also increase. Due to the risk of fluctuation, the floating rate of interest is usually lower than the fixed rate of interest. With a floating rate of interest for a specified loan tenure, you can either expect your EMI to reduce or increase depending on the rise in the interest rate.
When there is an increase in the floating rate of interest on your home loan, the bank will give you the option to either increase your EMI and keep the same loan tenure or to keep your EMI the same and increase the loan tenure. If your loan tenure reaches the upper limit, then the bank will give you the option to prepay a part of your loan. Using a home loan EMI calculator for various combinations of loan tenure and interest rates can help you make a smart decision with regards to loan repayment. Some banks may waive off the prepayment penalty fee for loans with a floating rate of interest.
The home loan EMI calculator comes packed with features that can range from the obvious to the not so obvious. It, obviously, shows the exact EMI that will be payable every month for a specific amount borrowed and a specific tenure. The feature that are not so obvious is the fact that this calculator can also provide the facility to include planned pre-payments towards the home loan. This means that when the calculator shows you the instalments payable, it has already accounted for prepayments and has also included them when showing the breakup of the expenses. The detailed break up will include the amount borrowed, the interest payable, the amount you will pay through prepayment, the processing fee and the fee for prepayment.
The car loan calculator is a tool that can be used to calculate the exact amount that you will have to pay on a monthly basis when you decide to take a car loan. This calculator too will collect information related to the amount you wish to borrow, the interest rates, the processing fee and the tenure of the loan and provide you with the amount that you will pay every month. Down payments for the vehicle don’t have to be considered when using this calculator and it too comes with the breakup of the expenses and the amortisation table.
The personal loan EMI calculator is the ideal tool for deciding how much you can afford to pay back since it is specific to personal loans. It too collects details of how much you wish to borrow, the duration, interest rates and the processing fee for the loan. It can also be customised to take into account any prepayments that you intend to make before telling you the EMI that you will have to pay.
Business loans like any other type of loans are repaid through equated monthly installments over a specified period of time. Here again, carrying out manual EMI calculation can be time-consuming and prone to human errors. Therefore, it is advisable to use an online business loan EMI calculator that is available on the bank website or a reliable third-party website. The tool can be used any number of times for free. It is not only simple and easy to use but also instant and accurate in terms of results. One major advantage of using a business loan EMI calculator is the flexibility to try out different combinations of loan tenure, loan amount, and interest rate in order to save money on interest payments. Business Loan EMI is calculated using the below formula:
E = P*r* (1+r)^n/([(1+r)^n]-1), where E is the equated monthly installment, P is the principal loan amount, r is the interest rate, and n is the loan tenure.
Enter the business loan amount, interest rate, and loan tenure into the tool and click on the ‘Calculate’ button. You will get an amortization table which represents your periodic loan repayment schedule. The table will consist of the EMIs, outstanding dues after each EMI payment, and interest payment. Using the business loan EMI calculator, you can pick a suitable loan tenure and a loan amount within your repayment capacity. Sometimes, borrowers choose to prepay a part of the loan amount before the end of the tenure in order to reduce the repayment period or the interest payment. The EMI calculator can also be used to get a revised loan repayment schedule that includes business loan prepayment.
A simple interest loan EMI calculator can help you calculate the simple interest on a given loan amount for a specified loan tenure at the applied rate of interest. The tool is simple and easy to use. All you have to do is input the borrowed amount, the simple interest rate, and the loan tenure into the tool. Click on the ‘calculate’ button to get instant and accurate results. For example, if you borrow a loan of Rs.3 lakh for 3 years at a simple interest rate of 3% p.a., you have to pay a simple interest of Rs.27,000 which is Rs.750 per month.
Apart from the online calculators, EMI calculators can also be configured in an Excel sheet. To do this you will need to know the formula that makes an EMI calculator works and also how to use formulae in excel sheets. The one disadvantage of the excel sheet calculator is that you need to know how to configure it and also need to input the interest rate after calculating the monthly rates. It also does not take into account the processing fee. By contrast, the online EMI calculator can take the interest rates as annual rates and convert them to monthly rates on its own. It can also include the processing fee and other smaller features like prepayments.
Calculating the EMI for your loan is crucial to determine whether it matches your repayment capability or not. Applying for a loan that exceeds your ability to repay the debt can lead to the rejection of your application. If you apply for a loan wherein the EMI is equal to your maximum repayment ability, your chances of defaulting severely increases. In case you are not able to check your EMI using an online EMI calculator, you can also do the same using an Excel spreadsheet. All you need to do is use the PMT function to calculate your monthly installments. The syntax for the excel function is:
PMT (rate, nper, pv)
Here,
pv = The principal amount or the present value
rate = The fixed rate of interest at which the loan is borrowed
nper = The number of payments to be made to repay the entire debt
The mathematical formula for calculating EMI = [P x R x (1+R) ^n] / [(1+R)^ n-1]. (P is the principal loan amount, R rate of interest per month and N is the the number of monthly instalments). Manual calculations are too complicated to perform accurately, which is why many borrowers are left confused after availing a loan. Understanding this pain-point led BankBazaar to develop one of the easiest and most user-friendly online Loan EMI Calculators.
A. In most cases they can be the same since all three loans work off the same basic set of information like amount borrowed, prepayments, tenure, interest rates and processing fee however with some calculators there could be a restriction placed on the amount to borrow based on the type of loan.
A. The only difference between the two is that with a calculator, it is a ready to use tool whereas with an excel sheet, you may have to program the calculator before you start using it. Such programing can be a little tedious and complicated, especially if you are not very comfortable with the software which makes the calculator the preferred choice.
A. Yes. These days most, if not all, banks have calculators, specific to various loans, available on their websites.
A. The simplest answer is that it’s fast and it’s convenient. This means that you can do multiple calculations in minutes where such calculations many take longer were you to sit down with a pen and paper. These calculators are also super accurate so it eliminates the possibility of errors in calculations, provided you provide accurate data.
A. When it comes to the EMI, assuming that the bank will approve the amount and tenure, the exact EMI that you will have to pay may differ slightly since there is a chance that things like the interest rates and the processing fee may be a bit different from what you used while calculating the EMI.
The bank will charge a penalty fee if a borrower misses an EMI payment. A missed or delayed EMI payment will reflect on your credit report. Not making loan EMI payments on time can have a negative effect on your credit score.
Enter the loan amount, loan tenure, and interest rate into the personal loan EMI calculator and click on ‘Calculate’. The result is as follows - your monthly loan EMI is Rs.11,249. The total cost of your personal loan is Rs.6,74,938 where Rs.5 lakh is the principal loan amount and the total interest payment is Rs.1,74,938.
In the case of a business loan and home loan, banks offer floating rate of interest. Therefore, your loan EMI may change with the change in interest rate. Some banks allow you keep the EMI constant while increasing the loan tenure. Loan prepayment can also change your EMI. Banks will give you the option to either keep the EMI constant and decrease the loan tenure or reduce the EMI and keep the loan tenure the same.
Calculating the EMI before applying for a loan will help you choose a suitable loan amount and loan tenure. Based on the EMI calculation, you can adjust the loan amount and loan tenure to keep the total cost of your loan within your repayment capacity. You can also decide whether you want to prepay the loan without risking a higher interest payment.
Pre-closing your loan before the end of its tenure can have a negative effect on your credit score. Making timely EMI payments can help you improve your credit score. Therefore, opt to prepay a part of your loan (not the whole loan) and reduce the loan tenure to save up on interest payments. Banks charge a penalty fee for prepayment.
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The most common thing everyone asks when they avail a loan is “What are EMIs? How do I know how much I have to repay every month to clear my loan?”
Understanding EMIs and amortization tables is probably the most confusing part of the entire process of availing any kind of loan. The EMI, or Equated Monthly Instalment, is important because it signifies monthly outflows towards repayment of the loan.
In order to calculate EMI for your loan, you should first understand its components:The formula consists of using the loan amount, interest rate and tenure of the loan (in months): to find out your EMI (Equated Monthly Instalments)
M = No of months to pay the loanFor example: You avail a home loan of Rs.5 lakhs and the bank disburses the loan in instalments of Rs.1 lakh each at each stage of completion of the house being funded. Once the first instalment is disbursed i.e.Rs.1 lakh, the borrower begins making interest payments. Pre-EMIs do not reduce the principal component of the loan amount..
Here, EMIs i.e. interest + principal are repaid only once the entire loan amount is disbursed.
If you plan to sell the house, or are expecting large income inflows orare anticipating higher returns from the property funded by the loan, it is better to opt for Pre-EMIs. However, if you are not sure and do not want to take any undue risks, Full EMIs are a better option.
Manoj Kumar, 29, a Bangalore-based MNC employee, fulfilled his dream of owning a new a car in 2010. He bought a car for about Rs 5.95 lakh. He managed to do this by availing a car loan. The down payment he was required to pay was Rs 1.5 lakh and the remaining amount was funded by his auto financier. The car loan interest rate was 12% p.a. and the loan tenure was set at four years. As per the terms of the agreement, he currently pays a monthly EMI of Rs. 11,700. Manoj goes by the payment schedule as set out by the bank. But, how does he verify the amounts payable as per the schedule? Is there any way he can reduce or increase the EMI based on his financial situation?
Calculating EMIs can be confusing and tedious. There are many borrowers who find it hard to understand EMI calculations and Manoj is no exception. Most borrowers are unsure whether they are paying the right amount as EMIs; in many cases, the lenders themselves may have erred in their calculations.
The irony of it all it that EMIs are not that hard to understand. Using MS Excel, a very popular tool used the world over, anyone can easily calculate the amounts due as EMIs.
An Excel spreadsheet is a software specifically designed for mathematical calculations and performs calculations using a number of preset formulae. This makes it one of the most convenient tools to calculate and understand EMIs or repayment schedules.
To calculate loan EMIs using Excel, you have to use the function ‘PMT’ . You will need to know the rate of interest (rate), the tenure of your loan (nper) and, the value of the loan or present value (PV). Apply this to the formula: =PMT(rate,nper,pv).
Example:If you were to choose a different frequency, say a quarterly payment schedule as opposed to monthly payments, all you would have to do is factor this into the formula to get the desired results.
Example:Its really as simple as plugging in data and receiving results, completely eliminating confusion and anomalies. This not only helps you as a borrower in choosing the right loan plan but also helps you adjust your EMIs according to your financial situation.
HDFC Bank offers various loan products meant for customers of different demographics and incomes. Calculating EMI on any of the loans can be done through a few simple clicks at BankBazaar which specializes in providing free financial services to customers and general visitors.
Availing loans can be a very tricky proposition if you don’t know the underlying details such as EMI amounts, interest rates, processing charges and amortization. You may be looking for a car loan, personal loan, or even a house loan, and the best place to begin your search starts from the Internet.
BankBazaar offers a dedicated EMI Calculator tool that will provide you with information regarding the loan break-up and amortization details. You can access this tool by following these steps:
Once you select an option as detailed above, you will be taken to a new page with different dynamic fields. To use the HDFC Loan EMI Calculator, please follow the steps outlined below:
Once you are done with filling the details, click on ‘Calculate’. The results will appear just below the ‘Calculate’ button. The results are shown in terms of ‘Your Monthly Car/Home/Personal Loan EMI’, ‘Loan Break-up’ and ‘Amortization Details’.
EMI Amount: The monthly amount you have to repay for your particular loan product, according to the details entered by you.
Loan Break-up: Loan Break-up section will show details such as the loan amount, total interest payable, processing fee, and the total repayable amount. The results are also shown aesthetically in graphical format.
Amortization: This result will show details of the amount to be paid at any point during the loan tenure such as principal paid, interest paid, outstanding balance, and total payment made.
After the rate hike by some of the leading banks in the country such as State Bank of India (SBI), Bank of Baroda, and ICICI Bank, HDFC Bank has also decided to follow suit by increasing its marginal cost of funds-based lending rate (MCLR) by 20 basis points or 0.20% across tenures. After the rate hike, the one-year MCLR of the bank stands at 8.6% p.a., while the rates for other tenures currently ranges between 8.25% and 8.9% p.a. The new rates of the bank are effective from 7 September 2018. Prior to HDFC Bank, SBI increased its MCLR by 20 basis points or 0.20%. On the other hand, ICICI Bank hiked its MCLR by 0.15% or 15 basis points and Bank of Baroda raised the same by 5 basis points or 0.05%. Hence, the one-year MCLR of SBI now stands at 8.45%, and the revised MCLR for ICICI Bank and Bank of Baroda is at 8.55%.
The rise in the marginal cost of funds-based lending rates by the top banks is expected to cause the EMIs of home, personal, auto, and other loans to increase, making loan products across all segments more expensive. According to several experts, this rapid increase in lending rates by both private and public-sector bank indicates a rise in the cost of funds for the banks. It also indicates the negative impact of the ongoing bad-loan crisis that the banking system is currently battling with.
14 September 2018
Vijaya Bank has now increased the marginal cost of funds based lending rate by 0.05 percent. The move comes following a similar stance taken by many of the other banks in the country. The new updated MCLR will be effective starting 7 September 2018. The one-year MCLR has increased from 8.65 percent to 8.70 percent. The overnight, one month, three month, and six month MCLR will all attract 0.05 percent higher interest rate than the previous value. The interest rates for these MCLRs will range between 8.05 percent and 8.60 percent. The three year and two year MCLR however remain unchanged and stand at 9.25 percent and 9 percent respectively. State Bank of India recently increased its marginal cost of funds based lending rate by 20 basis points across all the tenors. ICICI Bank and Bank of Baroda have also recently raised their respective MCLRs.
12 September 2018
After the rate hike introduced by State Bank of India (SBI), ICICI Bank has also decided to follow suit by increasing its marginal cost of funds-based lending rates (MCLRs) across tenures by 15 to 25 basis points. As a result, the current one-month MCLR of ICICI Bank stands at 8.55%, which is 10 basis points higher than the corresponding rate being offered by SBI. After the onset of 2018, the one-year MCLR of ICICI Bank has increased by 35 basis points. On the other hand, SBI has increased its one-year MCLR by 50 basis points since the beginning of this year. During the same period of time, the Reserve Bank of India (RBI) increased its repo rate by 50 basis points to currently stand at 6.5%. According to the experts, this continuous rate hike is indicative of the rise in the cost of funds of the banks along with the continued impact of the bad loans that were taken in previous years. As per the statements of the Senior Vice President of ICRA, Mr. Karthik Srinivasan, the banks have increased their rates gradually over the course of time, and this trend is likely to change in future. While the lending rates have gone up in the last few quarters, it has been a while since the deposit rates were last increased. Additionally, the levels of NPA (non-performing asset) continue to remain high and the resolutions are taking time. Hence, these hikes have been put in place in order to protect interest margins. Foreseeing another hike in the repo rate, banks are passing on the earlier hikes to their customers.
7 September 2018
India Post Payments Banks was launched on September 1 by Prime Minister Narendra Modi in New Delhi. According to a statement released by the Government, they believe India Post Payments Banks will be an affordable, accessible, and trusted bank mainly for the common. India Post Payments Bank is believed to be a milestone in the Indian banking sector with the payments bank offering numerous benefits and facilities to the common citizens of the country. India Post Payments Bank for the time being is offering a basic savings account, a regular savings account, and a digital savings account. An interest rate of 4 percent has been set for all of these accounts. The payments bank will also be offering a current account feature to individual businessmen and small merchants. Other than the current account and savings account feature, India Post Payments Bank will be offering multiple other features like money transfer, bill payments, merchant and enterprise payments, and direct benefit transfers. India Post Payments Bank is also planning to partner with other financial organisations to provide loans and insurance products. The payments has already announced a partnership with PNB Metlife Insurance and Bajaj Allianz Life Insurance. India Post already has a very large network, especially in rural parts of the country where they have close to 1,30,000 access points. This is nearly more than 2.5 times more than the number of bank branches present in the rural parts of India. The number of rural branches in the country will increase from 49,000 to close to 1.75 lakh. Digital transactions can be made using PAN and Aadhaar card by making use of biometric authentication and QR card.
4 September 2018
The annual report of the Reserve Bank of India for 2017-18 was released by the central bank yesterday. The annual reports puts the focus back on the shortcomings of the Marginal Costs of Funds Based Lending Rate (MCLR) system. The MCLR system was introduced back in April 2016 in order to improve the transparency when it comes to the lending rates. The MCLR system replaced the base rate system that was prevalent back then. As part of the list of the agendas for the coming fiscal year, the Reserve Bank of India has decided to review the MCLR guidelines. The Marginal Cost of Funds Based Lending Rate guidelines and the policy that deals with the subsidiarisation of foreign banks will both be reviewed in order to change the banking structure in the country. According to data provided by an internal RBI study group, the report said that it would be better if the banks switched to a new interest calculation system that replaces the existing MCLR in order to improve the transmission of the policy rate to borrowers. Bankers in the country feel that a change is expected to come soon as most of the banks around the world have shifted to an external benchmark that will help coming up with uniform pricing. Banks in India currently make calculations using internal benchmark. This at times leads to a difference when it comes to the rates between two banks. It is expected that this will be changing very soon.
3 September 2018
Google India has partnered with 4 banks to rebrand its payment app, Tez. In partnering with HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Federal Bank, Google will begin proving its app users with instant loan facilities.
Tez will be rebranded to Google Pay and users will be able to access customised loans from these banks with minimal paperwork. Since its launch, Google Tez has over 55 million downloads and is being actively used by over 22 million people.
Google has plans to expand its payments app on a global scale and believes that the features and innovations developed for its Indian consumers can be adapted worldwide.
31 August 2018
The net interest margin (NIM) of some of the leading public sector banks has shown improvement even after high levels of non-performing assets (NPAs) have been recorded. The NIM calculation is simple; the net interest income is divided by the average income earned from advances and loans. This is a factor used by investors to assess the financial health of a banking institution.
The domestic net interest margin of the State Bank of India (SBI) has gone up by 45 basis points to stand at 2.95% yoy in Q1 that ended on 30 June 2018. The NIM is likely to go up further with the increase in the resolution of bad loans and improvement in the CD ratio.
The margins went up for Canara Bank and PNB to stand at 2.751% and 2.90% respectively. The margins for Bank of India is 2.49% and that for Bank of Baroda is 2.65%.
30 August 2018
Ujjivan Small Financial Services Ltd. has announced the launch of the overdraft facility for customers from the small and micro enterprises domain across all its branches in India. This will be an add-on product for the MSE term loan that is already offered by the bank.
The overdraft facility is provided to all micro and small enterprises that have a turnover of Rs.50 lakh or above. The rate of interest offered is also competitive. The interest rate is for a time period of 1 year and the credit limit is between Rs.11 lakh and Rs.50 lakh with the provision for annual renewals. The EMI payment is made only on the utilised amount and this amount may be repaid at any time during the tenure. This helps MSE customers manage their cash flows in a more efficient and smart manner.
Ujjivan SFB also provides composite loans in which the overdraft facility may be combined with existing MSE term loans. This is useful for customers as it helps in managing their short-term and long-term business needs.
28 August 2018
Bandhan Bank, a private sector lender based in Kolkata is the latest to join looking to buy a controlling stake in Punjab National Bank Housing Finance Limited. According to some sources, it is expected that Bandhan will submit an Expression of Interest for PNB Housing Finance in the coming days. With the interest of forming a consortium, Bandhan has already reached out to some global financial institutions like the GIC of Singapore and some sovereign wealth funds. GIC, Singapore’s investment company is looking at a PE-led consortium. It may soon be choosing between a fund lend alliance or backing a strategic group. Bandhan will be making either a pure cash bid or a combination of cash and stock bid.
24 August 2018
The Reserve Bank of India (RBI) has asked rating firms to review the bank accounts of companies to capture the flow of funds. This is to assess the ability of a company to repay loans.
It is understood that several companies would not be willing to reveal these details under normal circumstances. However, when a rating agency tracks this data on money flow, it will be in a good position to highlight the movement of funds through subsidiaries or other stakeholders.
If there is any suspicious movement of funds, the company could come under the scanner and its cost of borrowing from banks would be high. Rating agencies say that the task of reviewing thousands of bank statements is overwhelming. They may use special software to ease the task of analysis.
23 August 2018
The launch of India Post Payments Bank is expected to happen sometime soon, according to some reports. This is following a pilot project that started in Ranchi and Raipur in January 2017. There are plans to open 650 branches which will India Post Payments Bank to cover most of the districts of the country. It is expected to provide employment to more than 3,500 people. India Post Payments Bank will possess the ability to cross sell insurance and banking products along with providing deposit services. The interests of India Post to enter banking does not come as a big surprise as it had shown its intentions back in 2013 when the Reserve Bank of India announced a new round of banking licenses. India Post Payments Bank will also be looking to get the regular Post Office Savings Bank and enable making digital transactions for these accounts. This will help the people who have deposited their money in a traditional post office savings to easily make transactions just like the rest of the banking world. Since 1 lakh is the maximum amount that can be held in a payments bank account, India Post Payments Bank gives an option to transfer the extra funds to a traditional postal savings account in cases where the 1 lakh threshold is exceeded.
22 August 2018
